Compensation-related employment risk continues to evolve as pay transparency laws expand and pay equity litigation remains active. New disclosure requirements are increasing visibility into employer pay practices, while recent class actions and coverage disputes highlight how these claims can create significant defense costs and insurance implications for policyholders.
Pay transparency requirements have expanded significantly in recent years as lawmakers seek to address wage disparities and increase compensation visibility in hiring. These laws typically require employers to disclose salary ranges in job postings or provide compensation information to applicants during the hiring process and may impose significant penalties for noncompliance.
Legislators are also increasing specificity requirements for employers across states. In California, SB 642[1], which went into effect on January 1, 2026, amends the state’s Equal Pay Act to require employers to provide realistic, good faith pay ranges reflecting what a new hire can be expected to receive, rather than broad or general salary ranges. The bill also lengthens the statute of limitations for employees to bring an Equal Pay Act claim and allows employees to recover for up to six years of pay disparity. Delaware recently joined the growing number of states adopting pay transparency laws with the passage of HB 105 in September 2025, scheduled to take effect in June 2027. The new law requires employers with 26 or more employees to disclose compensation information and general descriptions of benefits in job postings. While Delaware’s law does not create a private right of action for employees, employers who violate the law[2] will receive a written warning for the first offense, with civil penalties ranging from $500 to $10K for subsequent offenses.
By contrast, states like Washington provide a private right of action in their pay disclosure laws[3], allowing job applicants or employees to bring civil actions against employers and receive up to $5K per violation, plus attorneys’ fees. As more states adopt similar laws, litigation risk has increased across jurisdictions, particularly in those that allow private enforcement. Target recently agreed to a $2.25M settlement[4] of a class action lawsuit alleging it failed to disclose wage scales and salary ranges in Washington job postings in violation of state law. In another major settlement demonstrating the growing risk of pay transparency non-compliance, an IHOP franchise operator with several locations in Washington agreed to a $6.3M settlement in 2025[5] to resolve claims that it violated state law by failing to disclose salary information in its job postings.
While most employment practices liability (EPL) policies do not cover civil fines, penalties, or the underlying wage payments, employers may still incur significant defense costs in responding to pay transparency claims and related investigations. As one ongoing case illustrates, insurance coverage for these relatively new laws remains unsettled. In Feast Foods LLC v. Houston Casualty Company, filed in Washington federal court in July 2025, Feast Foods sought coverage under its EPL policy for a lawsuit brought by job applicants alleging that the company failed to include salary ranges and benefit information in its job postings. The insurer denied coverage[6], asserting that the alleged failure to disclose salary ranges does not constitute a covered “wrongful employment act” under the policy and that the $5,000 per-employee statutory damages sought by the plaintiffs were noncovered penalties. Feast Foods, in turn, argued that job applicants qualify as “employees” under the policy, and that statutory wage-disclosure obligations arise from the Equal Pay Act’s anti-discriminatory purpose. Although the case remains pending, it underscores key considerations for policyholders, including the importance of closely reviewing EPL policy language and confirming coverage aligns with a company’s evolving regulatory risks.
The rise of pay transparency laws is increasingly intersecting with broader pay equity litigation. As compensation ranges become more visible through job postings and disclosure requirements, employees and job applicants are better positioned to identify disparities between posted salary ranges and actual compensation decisions. This increased transparency may provide plaintiffs with additional support to challenge compensation practices through pay equity and discrimination claims.
Recent large-scale pay equity lawsuits continue to underscore the potential exposure employers face in this area. In 2025, a California court approved a $43M settlement resolving gender pay discrimination claims[7] against The Walt Disney Company, where plaintiffs alleged that female employees were paid less than male counterparts in comparable roles. Similarly, following a federal investigation, Google entered a settlement[8] with the Department of Labor to resolve allegations of gender pay discrimination and paid $28M to resolve a race-based pay discrimination class action.
As with pay transparency requirements, regulators are expanding oversight of employer compensation practices. New York City recently enacted legislation requiring certain employers to submit annual pay data reports detailing employee compensation by race, ethnicity, and gender across job categories. This requirement applies to employers with 200 or more employees and is intended to assist regulators in identifying systemic pay disparities. Massachusetts enacted a 2025 law[9] requiring employers with 100 or more employees to submit annual workforce demographic and wage data reports, which will be published annually on the Secretary of Labor’s website.
Expanding regulatory requirements and increased scrutiny of employer compensation practices are likely to further elevate litigation risk in the coming years. Combined with rising settlement values, the potential for “nuclear” verdicts, and increasing defense costs, these trends present growing financial exposure for employers. Companies should review their insurance programs to confirm that appropriate coverage is in place for pay equity and discrimination claims, and that policy limits are adequate.
Employment liability risks continue to evolve as regulators, courts, and lawmakers respond to changing workplace practices. The expansion of pay transparency requirements and heightened scrutiny of compensation practices are creating new avenues for litigation and regulatory oversight. As these developments continue across jurisdictions, employers may face increased exposure to class actions, enforcement proceedings, and complex employment-related claims. Companies should review their compliance frameworks, human resources policies, and insurance programs to ensure they are preparedness for this shifting risk environment.